TaxTMI 
TaxTMI 
2022 (6) TMI 1011
X X X X Extracts X X X X
X X X X Extracts X X X X
....cts and circumstances of the case. 2. For that the Learned Commissioner of Income Tax (Appeals) erred in upholding the assessment u/s 153A r.w.s 143(3) as valid, without appreciating the fact that there was no incriminating material found during search and the completed assessment u/s 143(3) prior to search u/s 132 cannot be reopened u/s.153A. 3. For that the Learned Commissioner of Income Tax (Appeals) erred in not considering the fact that Section 153A was introduced by Finance Act, 2012 and the said section provides that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. 4. For that the Learned Commissioner of Income Tax (Appeals) ought to have considered that various courts have interpreted the section 153A by deciding that assessment proceedings not pending either by operation of law or expiry of time limit for issuing notice u/s 143(2) or by an order u/s 143(3) on the date of search, cannot be reopened unless some ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Agricultural income of Rs.3.85 Lacs. 3.2 Subsequent to search, notice u/s 153A was issued. In response, the assessee filed return of income offering income of Rs.28.20 Lacs including agricultural income of Rs.3.85 Lacs. In other words, the income as determined u/s 143(3) was offered in response to notice u/s 153A. It is also evident that no assessment proceedings were pending against the assessee on the date of search and this year was a case of nonabated assessment year. 3.3 It transpired that the assessee had offered agricultural income from AYs 2001-02 to 2007-08 and the assessee was directed to file requisite details in support of the same. Pursuant to the directions of Hon'ble High Court of Madras, the copies of documents were furnished to the assessee. On the basis of assessee's reply and material on record, Ld. AO proceeded to determine the total income of the assessee. 3.4 Though the assessee submitted that the income of this AY was duly scrutinized u/s 143(3) and therefore, there was no power to scrutinize the same again. However, Ld. AO rejected the plea on the ground that the provisions of Sec.153A empower AO to assess or reassess total income of six assessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d as possessed by the assessee which is approx. 1/4th of landholding of Shri A.Vijaykant. Therefore, the income of the assessee should logically be 1/4th of agricultural income shown by Shri A.Vijaykant. Accordingly, the probable agricultural income of the assessee was reworked by considering 1/4th of agricultural income as reflected by Shri A.Vijaykant. Out of this income, 20% was to be treated as 'income from other sources' for lack of convincing proof. Accordingly, the ground was partly allowed. Aggrieved, as aforesaid the assessee is in further appeal before us. 3.9 We find that the assessee has assailed the quantum addition on a pertinent legal ground that the additions are not based on any incriminating material as found during the course of search operations and therefore, in case of concluded assessment, no such additions could have been made by Ld. AO. Since, these grounds assail the very validity of impugned additions / disallowance, the same taken up first. For the same, Ld. AR has relied on the decision of Hon'ble Delhi High Court in Pr. CIT V/s Meeta Gutgutia (82 Taxmann.com 287). The Special Leave Petition (SLP) filed by the revenue against this decision has alread....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Supreme Court judgment in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), it would be proper to note the facts in the same. 21. There, the Assistant Commissioner of Income Tax challenged the correctness of the decision rendered by a Division Bench of the Gujarat High Court. That Division Bench judgment allowed the Writ Petition/Special Civil Application of the assessee. 22. The respondent-assessee, a private limited company, filed its return of income for the assessment year 2001-2002 on October 30, 2001, declaring total loss of Rs.2,70,85,105/-. That return was proposed under Section 143(1) of the IT Act accepting the loss returned by the respondent. A notice was issued under Section 148 of the IT Act on the ground that the claim of bad debts as expenditure was not acceptable. On 12th May, 2004, a return of income declaring the loss at the same figure as declared in the original return was filed by the respondent-assessee under protest. A copy of the reasons recorded was furnished by the Revenue on the request of the assessee sometime in November, 2004. The assessee raised various objections, both on jurisdiction and the merits of the subject matter recorded i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll Cargo Global Logistics (supra), there would not have been any difference. It was finally held by Hon'ble Court as under: - 31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under:- "48. The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the AO to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the Ld. Counsel, though not specifically stated, would be that on annulment of the assessment made u/s 153(1), the AO gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search. 50. The provision contained in section 132 (1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce book....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eans that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under subsection (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 53. The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ower conferred on him under section 153A, was competent to issue notice under the said provision and require the assessee firm to furnish the returns as provided there-under. It was further held that neither under section 132 nor under section 153A, the phraseology "incriminating" is used by the Parliament. Therefore, any material which was unearthed during search operations or any statement made during the course of search by the assessee is a valuable piece of evidence in order to invoke the provisions of Section 153A of the Income Tax Act, 1961. In the present case, no such admission is shown to have been made by the assessee. The revenue could not place any incriminating material before us which has led to the impugned additions / disallowances. Therefore, these case laws are distinguishable on facts. 8. The revenue has also referred to the Special Leave Petition (SLP) filed by the revenue and accepted by Hon'ble Supreme Court in the case of Pr. CIT V/s Gahoi Foods Pvt. Ltd. (117 Taxmann.com 118). We find that SLP has been filed by the revenue against the decision of Hon'ble High Court of Madhya Pradesh as reported at 117 Taxmann.com 117. In this case, Hon'ble Court chose to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al. 13. In AY 2003-04, the regular return of income was scrutinized u/s 143(3) on 28.03.2006 determining income of Rs.48.20 Lacs and agricultural income of Rs.9.15 Lacs. The same income was offered in response to notice u/s 153A. The Ld. AO, on similar lines as in AY 2001- 02, estimated disallowance of 20% against various expenditure claimed by the assessee. The agricultural income was considered as 'income from other sources'. In this year, Ld. AO also disallowed 'Mandram expenses' of Rs.10.75 Lacs. The assessee submitted that this issue was already a subject matter of disallowance in original assessment proceedings as decided by Ld. CIT(A). However, rejecting the same, Ld. AO held that the expenditure was related to 'Pemlatha Peravai' where the Mandram was run in individual capacity to further popularity of her husband Shri A.Vijaykant. In the absence of vouchers, the expenditure was disallowed. The adjudication of Ld. CIT(A), on both the earlier issues, is common for AYs 2001-02 to 2005-06. The disallowance of Mandram expenses was also confirmed. Aggrieved, the assessee is in further appeal before us with similar grounds of appeal. 14. In AY 2004-05, the return of income w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ever, the same would not hold good in view of the fact that the assessee was subjected to search action on 23.01.2007 and the time limit to issue notice u/s 143(2) had not expired. Therefore, Ld. AO was well within his statutory right to examine and verify the income declared by the assessee. 18. In this year, the regular return of income was filed by the assessee on 06.07.2006 declaring income of Rs.2.38 Lacs. However, in subsequent return filed on 30.10.2006, the assessee offered taxable income of Rs.1.14 Lacs. In response to notice u/s 153A, the assessee offered return of income on 09.10.2007 declaring income from salary for Rs.1.44 Lacs and agricultural income of Rs.7.25 Lacs. The business loss was shown as Rs.1.09 Lacs. 19. Since the assessee was stated to be residing with her husband at Saligramam, the income from house property situated at No.15, Valleeswarar Koil Street, Mylapore was treated as let out property and the income from the same was estimated at Rs.17,047/-. The business income of Rs.2.79 Lacs as admitted in return of income filed on 06.07.2006 was taken to be the business income and the loss shown in the revised return was ignored. In the business income, ....